Spring is almost here. The trees are budding and there’s that sweetness in the air.
So with the spring selling season on our doorstep, what does the market hold?
In August the RBA cut official interest rates by 25 basis points. With interest rates at historic lows, general interest rates were reduced by less with each of the big 4 banks lowering their rates no more than 14 basis points. At this moment there are some excellent rates available in the market below 4% for anyone looking to move from their current lender.
Policy around investment lending has been tightened to slow this sector but it has not resulted in a cooling of the housing market. Growth in investment related credit has to 5% over the last 12 months (from 11% prior) however right now we are starting to see a lift in investor lending.
In South Australia we have recently seen an 11% fall in the number of new properties hitting the market while there has been an increase in the overall listing volume. What constitutes a new listing is a property that has not been advertised for at least the last 6 months. New and total listings are now starting to increase as we head closer to the beginning of the Spring Selling Season as they do each year, however the levels are not to what we have experienced in the past.
What’s interesting is that many sellers hold off for spring as they believe it’s the best time to sell when in actual fact as we have seen in previous years, the increase in listings does not necessarily increase buyers and can have an adverse effect on price growth as there are more properties for a buyer to choose from.
Auction clearance rates are one of the timeliest indicators of the housing market and they tend to be indicative of the broader housing market trends. It is important to remember that far more homes sell by private sale than by auction and auctions are only a significant proportion of sales in South Australia. Usually between 11% and 20%.
There were 82 auctions held in Adelaide this past week, compared to 97 last week and 102 at the same time last year. The preliminary clearance rate for the city this week was 68.8 per cent, up from 62.0 per cent last week and 58.1 per cent one year ago. Adelaide’s preliminary clearance has remained above the 60 per cent mark since the final week of July.
Adelaide is becoming more use to the auction method with many owners in higher demand or blue chip areas choosing this over the more common private treaty method.
It’s important to note that on a national scale there are less properties going to auction. This has seen an increase with the national clearance rates. With 2113 auctions held across the country last week (compared to 2654 the previous year) we saw a clearance rate of 76.6% (preliminary).
So what’s this all mean for spring?
It’s a little too early to tell exactly but with a fair amount of confidence we can see what is evident is that the amount of new property listings will have a huge part to play in the success of 2016 peak period. The belief that spring is a good time to sell usually equates to a massive increase in new listing numbers. As I mentioned before, as supply increases demand can drop off and this can have an adverse effect on clearance rates.
Another factor to consider is what the prospects for capital growth are like over the coming months. Prices in the combined capital cities have been on the rise for 4 straight years now and the much publicised increase in housing prices could start to deter buyers. Taking into consideration that we are seeing a slowing of growth in rental prices, purchasing a property, especially for investment is looking less and less attractive than it has in the past. Factor in the increase in construction, especially from new apartment dwellings and this adds further doubt.
Finally, interest rates. At record lows right now. Although low rates don’t increase someone’s ability to obtain credit what they do is give people who are looking to upgrade or buy a new property more confidence to do so. This means that owners who previously weren’t considering a new home or an investment property may now do so because money is cheap. If someone is now starting to consider buying an investment property it also means additional demand for housing. How many new buyers there are in Spring remains to be seen but it may encourage an increase in demand for purchase and could result in more people looking to sell their home.
It will be an interesting next few months that will be largely driven by stock numbers.